Ethereum's institutional moment and the digital asset treasury flywheel

Transcript

stable coin markets will be five trillion plus. And I think a lot of those holders are international. They're in Vietnam and Nigeria and Lebanon and Turkey and Brazil and India. You know, places where people want dollars and they can't easily get dollars. And so what happens when that $5 trillion is looking for yield? >> GM. Good morning. Welcome to the Milk Road Show. The daily crypto show that's like a group project in college. Runs on one person doing all the work while everyone else stakes the rewards. I'm your host Jay Hamilton. It's Monday, September 22nd. Myself and the Velcro team are currently on our annual retreat in Croatia. We're cooking so we can all dominate the upcoming full run. So this conversation was recorded last week on Tuesday, September 16th. Today we're joined by Avichel Gar, co-founder of

Electric Capital, a leading cryptonative venture firm managing billions in AUM. He's also an early early investors in projects like Near Dydx, Bitwise, and more. And prior to crypto, he worked at Google and sold a company to Facebook. Today we're going to discuss Bitcoin had its institutional moment in 2019 2020. Is 2025 the year that ETH finally gets its turn? We all understand that Bitcoin is on its way to becoming a leading store of value asset alongside gold. But what about Ethereum and other crypto tokens? How many store of value assets can there really be in crypto in the long run? And finally, what happens when 1% of money market cash moves into ETHbacked paper? I'm talking about DeFi.

I'll tell you, it's going to be a title wave. We're going to break all this down with Abby Ch. And before we jump in, if you guys are doing swaps, which I'm sure you are as you're setting up your portfolio for the next leg of the bull run, make sure you check out Milkroad Swap. Why? Because we built it to give ourselves a place to swap so we could have a cheap place to do our trades. So check it out at swap.mmillroad.com. Today's episode is brought to you by Figure Markets. Grow your cash like a bank. No lockups, just real returns. It's also brought to you by Nexo, the platform that grows your capital without locking it away. With that, Avichel, welcome back to the show.

>> Good to see you. >> Great to see you too, my man. Let's jump right in. You've talked recently in in your uh your role and with your hat on of your uh participation in ETHZilla and that digital asset treasury company. You've talked about there was a moment and a shift that happened recently when Bitcoin and ETH really became accepted as collateral by big credit funds. You know, you consider this high quality liquid collateral. What does this mean and what's the impact of this moment?

>> Yeah. So maybe starting at a really high level, these digital asset treasury companies I think are a really interesting phenomenon and they sort of they sort of blew up in the last couple of months in terms of just the volume of them existing and I think there's a you know based on what we see there's still a huge pipeline coming. You know this all started with micro strategy and I think Michael Sailor very correctly realizing that what he had was in Bitcoin a an asset that could go up 30 or 40% a year and he could borrow money at 7 10 12 14% a year depending on the terms. When you put that together, you say, "Wait a second. If the credit markets are willing to lend me money, uh, in his case, because he had an operating business to start and he was

able to sort of prove out the strategy. But if the business can borrow money and I can go borrow at 10% and buy a thing that goes up 30 or 40% a year, that that's like a money glitch, right? I should just do that all day every day and just, you know, lather, rinse, repeat." And so he started doing this and amassed, you know, $50 billion of Bitcoin. The company's the company's worth hundred billion dollars now. It's, you know, a remarkable thing that he pulled off. And other people looked at this and said, "Wait a second. If you can do it for Bitcoin, could you do it for other things?" Now, this opens up a whole can of worms as you could imagine, you know, uh, which assets and and how much do they go up and what are the draw downs in a bare market? And there's a

whole sort of set of questions that emerge here, but kind of fundamentally, I think the thing that he he noted or figured out in the capital markets and I think he is a capital markets genius as evidenced by sort of all these structured products he's built on top of Micro Strategy. What he noted was the willingness for the capital markets to to lend to go do this sort of a behavior. And so, you know, I think that that connection of the world's uh capital markets to flow them into crypto is a pretty clever innovation. And I think if you look at each crypto cycle, that's usually what happens. Like somebody somebody invents a new product and that that product gives you access to a new part of the capital market somewhere and and then that capital market gets tapped and all that money kind of flows in. I think that's kind of

what's happening here with these stats is it's just it's a capital market innovation to let capital flow into crypto in a new way. So we I think we all we all know the story of Micro Strategy and it's far enough in its existence and its story I mean its existence it existed as an operating company well before but its existence as a digital asset treasury and doing that playbook for us all to trust it and believe in it. Ethereum's new as a digital ass. What what changed? Why Ethereum now? What what is allowing Ethereum to have this type of I mean all these questions that you said? Can Ethereum have the same run that same playbook as a different asset which has different volatility and different uh

ups and downs in bull and bare markets? >> Well, there's there's an argument that actually more volatility is better, right? A lot of a lot of what drives the activity around these these vehicles is the ability to have options markets and volatility traders around it. So actually more volatility could be better. NETH is is more volatile right now than Bitcoin. There are a couple of different market participants here. I think you know there there are sort of the vault traders. They're the credit guys that want to lend into this. Um and then there's the people that want to buy these assets you know and have access to the shares directly. And in some sense the volatility and the credit guys enable this. But the the downstream effect if done well which you know is a big asterisk but if done well is actually you could have retail get a

really good product. Right. You could actually because the ETFs can't stake at least not yet. I think a lot of people >> not much. >> Yeah. Yeah. A lot of people think I think the the um the SEC will allow for this uh you know relatively quickly like potentially in the next couple of weeks. But um >> but will they allow like 100% staking or won't it still be 50% like >> Yeah, I mean you have to manage the liquidity because you have to you have to get you know you have to destroy the shares and and buy or sell the ETH. And so depending on on your inflows and your outflows, you do have a liquidity problem. Like you I'm not deep enough on the ETF structures. you should have um Hunter from Bitwise come on. But my understanding is that what that would

mean downstream is you wouldn't be able to use 100% of the assets for staking. And even if you did use 100% of the assets um you could end up in tricky situations where let's say 100% of the assets are staked and then you have these OTC transactions you could do to say hey look I'll sell you my staked ETH because the the exit queue on ETH is you know 50 days right now or whatever it is. And so then you might have to eat a bunch of slippage, right? And so like on the way out you might you might have transaction fees on this um that that that the the ETF has to eat somehow pass through which could make it an inefficient structure relative um relative to what ETFs typically are. So I mean even even an ETF that has you know 20 bips of fees or 30 bips of fees

um you know like the bitwise ones I think are generally lower cost but um you know it could be a material part of of the fee structure of these things to to get in and out of these things every day. You're just eating the slippage. So, you know, you look at it from that perspective and you're like, well, actually, a thing that can 100% stake the ETH and in the case of Ethilla, where where we're the asset managers on the back end, the the thing that we're working with, we've already started to do is you can start to do all these other things in DeFi, especially with with Ethereum, which, you know, don't even exist on the Bitcoin side. Um, and so, you know, we announced, for example, a partnership with Etherfy, um, and deployed assets from Ethilla ETH into Etherfy, you know, to the tune of about

$100 million. And so Ethereum DATs and potentially Salana Dats, you know, Kyle from Multicoin, they're they're um running a big one on the Salon side and some of the other ETH ones have talked about this. And so, you know, that starts to be compelling because what you might be able to do is, you know, let's say base staking yield on the ETH side is something like 2% right now. I can't make forward statements, but I think the the potential for these entities to to significantly outperform staking is what makes this now compelling, right? So now now not only do you have like the fundamental ETH exposure as a as an end holder of these shares, but you're you're getting some exposure to the DeFi ecosystems as well, which is outsized yield. Um, and so all of a sudden, you know, if you could in theory make double

the yield of staking, like why would you hold an ETF would really be the thought, right? Or or why would you hold the underlying? It's, you know, yeah, I could stake it on Coinbase, but maybe what I just want to do is hold it in my, you know, 401k account and get, you know, double or triple the staking yield. Um, that starts to look really compelling, I think, from like an end user perspective. So, so I think there's an argument that if well-managed, these entities are actually quite quite good for retail. But, you know, there's there's a lot of sort of ifs layered in there, right? There there are a lot of things that can go wrong. >> Well, that's why you're saying if well managed because you and I both know that some will be well managed and some won't. And the the outcome of that will

uh we can talk about the risks of that in later in the episode if we if we get to it. I don't want to dive too deep into that. We've talked about it a bunch in recent episodes. I want to touch on Salana. Uh, we've been talking so much about Ethereum on the show recently. The big credit funds, they seem to be moving into Bitcoin and Ethereum. Are they moving into Salana and other crypto tokens? >> Um, they're starting to. So, the big credit funds actually are not that deep yet into the cryptobacked lending and and this whole universe in general. You see this kind of with the investment banks as well. So, like uh take somebody like City, right? Like a a proper GIB, like a big bank. They've done a small handful of these uh DATs. If you look at the smaller investment banks, you know,

uh, Caner, um, you know, Cohen, um, Clear Street, these guys are doing real volume. Like they're the ones that are actually driving this. And you see this in a lot of markets, right? Like the the the upstarts and the and the new entrance find this wedge and then they run with it. And so I think that's similarly what's happening kind of on the credit side. You have you have some big guys that are doing this, but um, a lot of it is sort of new opportunities for new people kind of breaking in or even inside some of these organizations. you kind of saw this on the endowment side, you know, four years ago, like who was choosing to go into the cryptovc firms, it usually was not um the most established person inside the organization. It was somebody more junior inside the organization. And what

they were doing was saying, "Hey, this is a direction I could bet my career on, right? Like if I'm if I'm the upand cominging person, I want to get a promotion inside the organization. Let me take a bet that this industry works, and if it works, then then you know the it'll it'll be a new profit center. It'll make a bunch of money." and I' I've sort of put my stamp on a on a thing that I advocated. And so inside the organizations, you also see generally even if it's an established entity, you'll see like the upstart people inside the organization are the ones who are really driving this. So I think it's actually still pretty early days even on the ETH side, you know, to to be able to really borrow against this and do interesting things. And so then when you start talking Soul or NER or

AVAC or some of these other things that that um you know have DATs or people have talked about maybe there should be DATs and and perhaps there will be in the coming weeks, you know, I think it'll be interesting to see how the credit markets respond there. Um, and I I I suspect post rate cuts, I think I suspect that that the credit markets will open up. Like I think people will just be more risk over the next 6 to 12 months. Um, and so as a result, the willingness to lend against these things will go up. Um, and and people will sort of move out the risk curve a little bit. So that that, you know, it's a it's a little bit forward-looking in that regard. is like we don't know exactly yet, but I think my my my intuition is like there's a lot of money to be made

here and there's a lot of people that would be willing to try to make this a stamp in their career and so they're willing to do it. >> It's another reason that the we still have a ways to go in this bull cycle. I I I want to talk about Ethereum right now and where it is in its evolution, not from an adoption standpoint of the usage of the chain, more from a market adoption, capital market adoption standpoint. Is Ethereum having its Bitcoin moment? And let me phrase what that means. To me, that means, you know, as Tom Lee says, Ethereum is the next Bitcoin. It's the next asset that will be recognized on the level that Ethereum

is. And we can talk in a minute about Ethereum as a store of value in the comparison of Bitcoin. But just if you zoom out, is this Ethereum's moment to get to the point where anybody can confidently go to Thanksgiving dinner and say, "Yeah, buy Bitcoin and buy Ethereum to your mom who is totally not invest in in crypto on a regular basis." >> I think it's pretty close. you know, the the way we zero index these things, it's always it's hard to compare two things because they started in such different places with different origin stories, but you know, ETH is just turned 10 in July 2025. And so, you know, we're we're now in September, right? So, you're you're roughly two or three months after that. So, that's kind of where Bitcoin was. Bitcoin turned 10 in in January uh

2009 uh 19 because it was started in January 2009. So if you look at it kind of zero indexed, ETH is roughly where Bitcoin would be in like Q1 2019. And I think if you look at the institutional adoption of of Bitcoin, you know, like at what point did Paul Tudtor Jones and uh Larry Frink and you know, Stan Ducken Miller all all these people sort of step up and say, "Wait a second. I think this might actually be a thing." And that transition of going from being a perspective store of value to people saying, "No, no, no. I think this might actually be a store of value." that that transition kind of happened in my opinion for Bitcoin between 19 and 24.

>> That that four to five year window is where a bunch of people, you know, started actually making meaningful allocations in their in their portfolios to this and started, you know, advocating for for for Bitcoin as a store of value. I think that's roughly where ETH is today. Like today, it feels a little crazy to say, hey, this this might, you know, be a store of value. And I think you're starting to see that same institutionalization happen. you know, I think the big banks, the big um asset managers, uh you know, even even uh the black rocks of the world, the people that, you know, want have ETFs, all of these sort of same people are saying, "Wait a second, maybe history rhymes." Uh you know, maybe maybe this is the next one. Um and Wall Street always loves to have an next one. So, I

think um I think we're roughly where Bitcoin was in 20 2019. And I think we'll, you know, if if it works here, we'll look back in sort of four years and say, yeah, 20 2025ish, like early 25ish to, you know, roughly 29ish, 20, you know, 30 is when ETH sort of stepped into, oh, this is actually a store of value. And Wall Street set up and said, "Yes, we we'll actually recommend that people get some allocation here and it makes sense to have allocation for all the aforementioned reasons, right? Stable coins and DeFi and Wall Street is building here and yada yada." Like I think that the narratives likely start to kick in here over the next uh, you know, three to five years.

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Um, I think more the more the former. I think it's really I mean Tom Lee has done such a great job with BMR and generally when when you get kind of one that breaks through, you know, you have some sort of typically a power law in these markets and so it's actually, you know, the bigger Toms gets, then the bigger Joe Luben at at Sharplink gets, the bigger, you know, the Ethilla one gets and so everybody sort of benefits. But, you know, I think it's it's actually for the scale that we're talking about now with these DATs, um, you know, uh, you know, in aggregate north of, I think, 15 billion dollars on the ETH side, it would actually be quite challenging to deploy 15 billion on chain. Like there just aren't enough places to put it yet. And so, I think primarily what it ends up being is is

like a vehicle for the credit markets and the vault traders and and retail to be able to say, "Oh, this this is a place where I can get exposure in a differentiated way because at least I get the staking reward at scale and don't have to do it." and potentially could do it in a tax advantaged account. And so I think that that's probably the biggest impact in the short term. And then I think as the as the onchain stuff matures a little bit, as you get RWA coming in, as you get new, you know, usage on chain, then there's a positive flywheel because now there's there's a ready source of capital, right? Like there's there's ETH and dollars that you can borrow against that ETH that can enter on chain and kind of keep the flywheel going now that you have a huge amount of ETH sitting there. So I think

it's it's a necessary component to do the the digital oil productive store value kind of kind of stuff over the next five years. And so it's like it's a good thing to to exist there. >> Um but I don't I don't think the the markets could right now absorb 15 billion on chain in sort of a productive way. >> It is a very difficult question to answer. What's the end result of this? Is this like a would you rather own ETH or would you rather own silver store of value conversation? >> Yeah, that's an excellent question. I mean that's one we talk about a lot internally. Actually, it's funny that you picked that. I don't know if I mentioned that somewhere else and you picked up on it or you independently came to it, but I I look at that and I'm, you know, I I actually think the

the real long-term comps are, you know, the the Wall Street financial markets and what does it mean to have some sort of third space that's not the the US uh financial system and not the Chinese financial system. So like you know what does the world really want in my opinion is a dollar denominated financial system where counterparties can can make contracts with each other and and settle transactions without the US government unilaterally being able to kick them out of that system. Right? That's actually I think what a lot of the world wants. That's what India wants. That's what um actually a lot of people in China would want because they do business overseas.

That's what Turkey, Brazil, like have you pick. That's actually what people want. But let's set that aside for a second. And if I think if you just take like the narrow store value commodity sort of lens on it almost like a bitcoin lens even if you say uh bitcoin is going to be as big as gold and and therefore should be worth north of a million dollars and it should be worth north of 20 trillion in market cap. I I go down the list of things that are pure commodities um that sort of have a lot of these same properties and I look at something like silver um and silver is north of two trillion and I think to myself, you know, would I rather have 50 kilograms or 100 kilograms of silver or would I rather just carry some ETH in my pocket um and and use it productively

and get convert it to dollars instantly and move it around 24/7 and potentially use it productively. It just I think on every dimension ETH is better than silver and and you know I think markets tend to be rational in this way over time. And so I think a lot of people start to look at this and say, "Wait a second. Do I really want silver exposure? Do I really want to like have some physical silver or would I rather just pick up some ETH, I think ETH once it gets into that direction and that trajectory, then I think people say, "Wait a second, isn't this better than gold?" And I think actually there's an argument that that just like Bitcoin is superior to gold because it's digital and and lets you do certain things that you can't with gold. Um it's not a pure substitute. You know, I think a lot of

people will say both. Um I think you can look at ETH and say it's also not a substitute for either of those, but but is additive um in a lot of ways. And and so I think a lot of people sort of reason through that this is we saw this happen you know between 16 and 20 on the BTC side. People sort of realize that it wasn't a replacement for gold. It was additive to the portfolio and you should add it in. I think people are now going to go through the same reasoning for for Ethereum >> and then do we go further down the crypto stack than that or does it stop at ETH when it for store of value? >> I suspect it does not stop. You know I think there's there's a good analogy here. There's actually some like really interesting research I was I was reading

about um about sort of uh life on Mars and then they found some like certain kinds of deposits and like they're trying to figure out like could it they have been synthetically produced and and it doesn't appear so you know all sort of markers point to just more evidence that there was microbial life. So let's say we come to the conclusion that actually there there is life on Mars and and we're able to come to the conclusion that it was there's no panspermia here. It wasn't like a rock from one planet hit the other planet and and it sort of you know did its thing. It's it's like, you know, a different branch of the life tree and we're like, "Wow, this is just a different way to have life and and it's right there." If you have life on two planets right next to each other in

the same solar system, I think you have to update your probability, your priors on how much life is there in the universe, like not necessarily intelligent life, but at least microbial life because what you have is sort of multiple existence proofs, right? And so the probability just went way up. So I look at something like Bitcoin and say it is so unlikely that the internet would produce something like this, right? Right. It's it's a purely internet native meme'd into existence thing that we took from the internet and backported into the legacy financial systems and and the legacy markets and legacy society. That's like a pretty amazing accomplishment actually from the internet that that the internet birthed this. And I think if it happens once you look at that and you say well now I have an existence proof like the probability

of this happening was basically zero. But the fact that it happened suggests to me that actually the probability of it happening is higher than my intuition might have led me to believe. >> And if you get a second one, I think you get to a place where you say, "Wait a second. If it happens twice, the probability has to be way higher that that markets just want this for some reason." Now, does that mean there's going to be a hundred? Probably not. You know, just like in traditional markets. But, you know, I think if you look at traditional market stores of value, you know, you have you have gold and silver, but you also have uh fine art, right? Right? We were talking about art before we got one. Um you have uh farmland. Um you have all these different sort of esoteric types of of land that you could

invest in. You know, you have all these submarkets like, you know, our our Pokemon cards for some group of people in store value. They've actually, if you look at them, you know, from a from a Kagger perspective over the last 10 20 years, they've outperformed everything. And so, you know, I don't think these things are are they're not cannibalistic, right? They sort of build on each other. So, I look at that and say, wow, if you get two, I think you have to update your priors that there's probably way more than two. I don't think you get like a hundred, but I don't think that's crazy that you get, you know, five, six, seven, 10 digital stores of value. And you people look around and say, "Yeah, like I would rather have these properties. I would h I would prefer to have it be guaranteed

by math and cryptography and be immutable. I would prefer that it's seizure resistant from the government, that it's 247 markets, that I can build on top of it, it's programmatic and has APIs and all of these things, right? And and for different communities of people, it may make sense to to snap to different sort of local versions of this. I I'll give you another example. You know, I think if you look at social networks, yes, you have Facebook, which is huge globally, but Twitter can exist or X can exist, right? It has its own sort of unique little community and and and and sort of market dynamics. LinkedIn can exist and it has its own little sort of quirks. Um, Tik Tok obviously can exist. Instagram had Facebook not bought it as its own thing.

Um, uh, and then you start going internationally, right? You have cacao talk in East Asia, you know, you have Vikontacte, you have sort of these regional networks that spin up for for various regulatory reasons or for cultural reasons or language reasons. And so you start looking through, you know, Telegram, right? Has a has a different sort of install base. And so you start looking at this and you say, "Oh, wow. It wasn't actually just one social network that got to a billion users." Like you actually had multiple um and they and they met different needs for different types of people. And actually, you can be on you can be on LinkedIn and you can be on Twitter and you can be on Facebook. Even if one is your primary, you probably have, you know, positions in all of them.

um you have profiles in all of them. So I think I think that analogy is kind of similar like I think in 2005 or six or seven if you told people that you will manage you know six messaging apps and you'll have to manage you know eight different uh social media profiles. Um but that's just you know the way the world will work instead of just being one. I think people would have said that that doesn't make any sense like why would I have eight social media profiles? That's what you have to do now right that's >> I still feel that way. >> Yeah. Um, and so I suspect that that's where these markets end up is and and and you know, people forget too at internet scale, you know, with 5 billion people and five billion mobile devices and so on, 500 million is not that much,

>> right? 500 million people doing a thing is not that many people, but 500 million people snapping to, hey, this is this is a store of value for us could sustain a trillion dollar market, right? I don't think it's at all crazy. Like I don't think there's 500 million people that that own ETH today, right? And or Salana. Um and so >> you know I think these markets are are quite large and I think they're they're people are really underestimating how big they'll be or how many of their of such things will exist. Um and the history of the internet and software and history of markets would suggest that actually there's going to be more than people expect and they'll be much bigger than people expect. It always makes me think of a line that Pomp said to me on the show, gosh, like a few years ago,

uh, which was just looking at age and time. And right now, if you were born 15 years ago, you were born, Bitcoin existed. Another 15 years from now, you'll be 30 and Bitcoin existed your entire life. So, you know, I think everything you're talking about is so relevant. It's just it's the time that we need to get there. And even the dad's conversation we've had recently, uh we had Andrew Keys and uh Andrea from the Ether Machine on the show and >> and they're great. Yeah. And and they were both talking about the adoption just being this inevitable curve, right?

That it's, you know, it's it's really just a matter of time right now that we we just we need more time. And as more time passes, all of these things come to come to come to be because as you said, they are better forms of money or better forms of store of value and all the uh programmability on top of that. >> I I want to I want to shift slightly because I've got a couple of uh of like kind of more quick hitter questions. I don't know if I would say that necessarily, but I got a couple things I want to test with you because I know you've been talking about this recently.

You got great takes on this. First, I want to talk about this DeFi afterboom that everybody's we we keep everyone keeps talking about this that okay, DATs are going to cause this DeFi afterboom, right? And you said it earlier that DeFi isn't ready if there's let's say 15 billion ETH in DATs. DeFi is not ready for 15 billion to be moved onchain yet, but they will be. And a lot of that ETH is going to be, that's what all these stats are going to do. are going to get yield from from these from their their holdings from this ETH. So I have a few questions. First is like any when and how big this will be like is all is all ETH going to move on chain and be liquid

staked and then re like rest and then liquid you know like is it all going to happen? When is it going to happen and how will it play out? >> Yeah. So so I want to clarify one thing. I I think I should um be more precise in my statement. So I think you could certainly put 15 billion into DeFi today. like you could park it in a like you know the TVL can support it. I think they're they're certainly from like a pure technical perspective like a smart contract perspective Ethereum can support these assets um and and you could stake them or restake them or whatever. The question is where does the yield come from and is there a an underlying productive use of the capital so that that yield that's that's flowing through is not just like you know um handwavy tokens like we'll we'll pull it

from the future at some point because that's not sustainable. That is I think the missing piece right now. So let's say you did park a bunch of Ethan a well who's going to borrow it and uh why are they borrowing it and what rates are they willing to pay you and is there some fundamental productive use of that stuff and so I think the missing piece to really have uh sustainable productive yields on chain is you need actually to be able to move dollars in and out of this system and be able to use them for productive mechanisms. So in effect, what you need is a US dollar capital market to exist here and to be able to get a variety of assets um uh and exposure for the people that hold those dollars in tokenized form. Um and then that will create lots and lots of

opportunities for people if only to be able to say, look, I'll deposit my ETH, I'll borrow a bunch of USD, and then I'll go use it productively in these other places. But right now, I think the missing piece is how do you productively generate yield? That's actually the bottleneck. You know, how long does that take? I I don't know. But I think um you know you you you sort of um you're seeing people sprint pretty hard at this. You know I think like the Etherealized team is sprinting pretty hard at this. Superstate um is sprinting hard at this um to bring tokenized stuff on chain. You've seen Robin Hood saying hey we'll bring um you know private equities on chain like startup equity.

Um you have to imagine um Coinbase is thinking about this. So there are a lot of people thinking about this in terms of how to make it real. You know TBD how long it takes. Uh these these things tend to move a little bit more. So >> but will it happen though? Is this Yeah, I think it's inevitable. Yeah. >> Right. >> And and similar to the conversation we're having earlier, like I think it's entirely possible that for different types of markets, it happens in slightly different places, right? Um like I don't think it all has to happen inside the Robin Hood L2. It could happen inside, you know, the Etherealize ecosystem. It could happen on multiple L2s. Um you get a bunch of interop that can happen, you know, it could happen, uh parts of it I suspect will happen on the Salana ecosystem. there may be assets that

really benefit from real-time composability um or or sort of the the technical structure there and and sort of the markets on Salana side are are you know very heavily retail um hence you know all the memecoin stuff that happens there and so could could there be a bunch of um you know like could could you imagine like all the Pokemon stuff actually happens on on Salana right certainly and I think that's a that's a that's actually like a very productive investment from the last 20 years um in terms of compounded growth um so it could actually happen I think in multiple places um and it's all kind happening right now. I mean, this is clearly there are big big parts of the ecosystem both in terms of number of people and dollars and the foundations and the VCs. Everybody sort of understands that that you need capital

to be used productively at the end of the day. Like you you can't you can't just give people 15% yield. What needs to happen is a business or a person, some entity on the other side needs to be receiving funds and be making 20 or 25% on on return on equity on on that investment in order for you to ultimately be able to make a productive 15%. Um, and so if you don't want this whole thing to be a Ponzi, if you need it to be productive, that's what needs to happen. And enough people realize that. And so I'm almost certain that it happens, you know, does it happen in a year or does it happen in 5 years or 10 years is like the big open question right now. I tend to fall somewhere in the middle. I think it'll take a couple years. I think we we may get over our

skis on this cycle and people may say, "Hey, look, Apollo and Black Rockck, you know, you have this like battle fund and Apollo's coming with private credit and KKR is going to come and you have your pick." But these these are very large organizations and they tend to move slowly and it takes a couple years. And so, as is typically the case, I would not be surprised if one of the metas in this in this cycle is, "Hey, the institutions are actually here this time." And then people sit up and say, "Wait a second, but nothing's happening, right?" Like, yeah, well, okay, great. Like, Black Rockck is here and Apollo's here, and it like doesn't matter. And and that, you know, that is when the bottom falls out where people are like, "Wait a second." Like, it's not real.

When actually it just takes a couple years, right? It just takes a while for the for the organizations to actually shift. and then three or four years from now, people wake up and they're like, "Wait a second, this stuff is actually real." You know? So, that's just that's just human nature. So, I think people people will be a little too eager to have this happen in three months and it might take three years. what happens if if this when this does happen and whether and I completely agree with your thesis on how this likely plays out over the next you know the rest of this cycle and the next four years but when this happens and money market funds and money market cash starts to really accept crypto collateralized paper right will what's the impact of that

>> it's it's a good question so I'm I'm not deep enough on kind of I'm not a macro guy so you know and and so speaking a little out of turn here. Also, I think obviously this is not financial advice, but I think with a lot of these things, you can be kind of ADIQ about it if you know the Midwip meme, right, is you don't have to overthink it and you don't have to be genius and it's just there's a lot of cash in the world and there's a lot of people that need to put their cash somewhere productively and even if you you look at the 7 and a half trillion sitting in money markets in in the US, once you go internationally, you realize how big these markets are, right? And so, you know, this is this is the case for why stable coin markets are

going to be so big. You know, stable coin markets will be 5 trillion plus. And I think a lot of those holders are international. They're in Vietnam and Nigeria and Lebanon and Turkey and Brazil and India. You know, places where people want dollars and they can't easily get dollars. Um, and so what happens when that $5 trillion is looking for yield, right? So, I I think there's there's, you know, a lot of demand in the world for productive financial products and most of the world outside the US and Western Europe actually doesn't really have access to productive financial products. And so, you know, I think the ADIQ the ADIQ sort of observation here is there's just so much money in the world that doesn't have access to any productive asset uh you know, cash flow that that all of that money is hunting for yield. Um, and as

all those dollars move on chain that it it just, you know, there's going to be trillions and trillions of dollars hunting for this stuff. So, yeah, I don't think I actually don't think you have to like think that deeply about it. It's just like large number times small market share equals like great outcome, you know, sort of startup mentality. And if you're directionally right, you're, you know, you're probably underestimating how big it will be. >> Speaking about not thinking that deeply and stable coins, I want to combine those two together and test the simple stable coin thesis with you. So there's a simple thesis which is stable coins continue to grow. As you said, they're on their way to 5 trillion. That leads to inc most of that is happening on Ethereum. If you assume that most of that's going to continue to happen on

Ethereum, that leads to increased demand for ETH and the need for security using the ETH that leads to an increased price in ETH, which leads to more institutional adoption is is the thesis for I mean that's just one thesis for for Ethereum. Is it that simple? And do you buy into that? What what breaks that? What makes that not come true? >> Um yeah, I basically I basically believe it. Uh you know, I think the flywheel is really simple. People want dollars. Most of the world doesn't have dollars. Once they get dollars, they say, "What can I do with these dollars? Oh, I can buy some treasuries. That's great. 4% yield in dollar terms relative to my local fiat being terrible. That's amazing.

That's the best financial product I have." And then they start looking around and somebody shows up and say, "Hey, would you like to make 15% on reinsurance?" Uh, you know, we're investors in a company called REI, which is a reinsurance company. Phenomenal business. Like, you know, for anybody's looked into the reinsurance industry, just phenomenal, phenomenal businesses. Warren Buffett has made many billions of dollars on reinsurance. and um you show up to these people and you're like, "Hey, would you like to make 15% instead of 4%." And I think a lot of people say, "Yeah, I would love to do that. That's this sounds great." And and all that money starts to flow, right? So, it's just all of a sudden now you got a a protocol and and you got retokens and you get a secondary market around reinsurance. And so, all of a sudden, um

you know, you have other people that say, "Oh, I I can offer you this product." And and all of a sudden then you need portfolio management tools because you got to like manage all these assets. And and here we are, right? We've recreated the financial system, but we've done it in a in a 24/7 transparent cryptographic, you know, programmable way where anybody can participate, any developer can participate, any individual can participate. Um, and so, you know, I think that I think post genius in the United States, like the stable coin greenlighting here that's happening, I think that stable coin flywheel into productive assets, um, it's just sort of markets are going to do what markets do and and I think that the desire for people to make yield on their money is a is, you know, a very very big driver in the world. So now I think it's just a

matter of time. Like I think I think it's one of these it's just like in the 90s could you have built you know embed on the internet. Yeah. It's just like it's going to be a thing and you have to be smart about where you put your money and you want you don't want to blow up and you don't want to take too much risk and yada yada. But if you're smart about it you can you can sort of take these directional bets and sort of you don't have to be you know you don't have to be a genius to say like oh all the arrows point in one direction. Um you know let me on that trend. >> It comes back to something you said on one of the first I think the first time we had you on the show. you were talking

to uh somebody who worked in a grocery store and they were asking about investing and you said keep it simple and don't don't try to don't try to get the quick gains. Invest in this the simple things, long-term investing, not trading. And it really is that simple, but it's it's so hard to get out of your own way as an investor. Uh okay, last the other thing that was really I think interesting insight from that that grocery store conversation was how rational that guy was. like he was not, you know, what you would consider like a typically well educated, you know, like putting on a suit, working in an office, managing money, but you could see that he could reason through stuff like pretty pretty reasonably. And so, you know, I think a lot of the world kind of back to this like simple maybe maybe the

takeaway is it's simple but hard, right? It's actually like people want yield. People want to put it in productive places and they're you know, you have to be patient, make good investments and let them compound, but actually a lot of the world is is willing to do that, right? they're willing to buy every week on the stock market. Like once the meme takes hold and Warren Buffett tells you just like buy a little bit and just hold and that's like the right way to get rich long term. People figure that out. And I think a lot of the world will do that on chain too. They'll just say, "Yeah, there's really good stuff. I should just buy the good stuff and hold it and get the yield and and make money and stack and compound and not do the crazy stuff." Um because I'm just gonna

lose money and that's a casino. And over time like they'll learn that and and then sort of you know the market does what it does. >> Yeah. And you brought up Robin Hood earlier in this conversation and you know when Vlad Tennv started Robin Hood nobody thought that the young generation was going to go buy stocks in that way in the way that he showed that oh wow they do want to do this and we just need simpler easier ways for the world to do that. So I think you're right there is you know and that's where fintech colliding with crypto right now is a massive adoption cycle that is going to be caused on that side too. Yeah. Yeah.

I mean, I think fintech and crypto are now one and the same. Like crypto is just the back end for for fintech. Yeah. These things have completely converged. Um like there's no reason to to even think of these things as separate categories in my opinion. >> I like that take. I really like that take. It's funny. It's so obvious, but nobody's saying that yet. >> Uh okay, last last question. I I asked our community what they wanted me to ask you today, and not financial advice, but they said ask them how to invest in dads. >> And let me phrase. Let me let me contextualize this for you. We've had a lot of community members and I've talked to a lot I talk to retail investors every day that have not done well with investing in DATs so far because they they're they're very volatile. They're

they're difficult to understand the way the unlocks works, the way they're uh the way they're raising capital, all these things. Unless you're a financial marketing expert, those things are difficult for retail to understand. So, let me ask you this. what's the playbook that could work for retail? >> It's really tough. The reason it's really tough is that there is a lot of financial engineering going on. And so I actually think most retail probably should not be touching these stats. Um unless you really understand, you know, like what a pipe is or how leverage works or how convertible debt works and you're able to parse, you know, an AK or you're able to parse some of these SEC statements to understand like what what exactly is happening. And so you see you

see this challenge actually even on some of these like dashboards where where people will talk about here's the MNAV for these instruments. Sometimes those are wrong because the person that's reading the thing doesn't doesn't understand that some amount of debt is encumbered. So you can't actually count it towards like the market cap value of the company. It's actually going to convert into shares. And so like even the dashboards are having a tough time keeping up with this. So I think it's very risky. I think the the way to think about it is one, you want to pay attention to the MNAV. And if the MNAV is significantly above one, you you're taking a lot of risk. You're taking a lot of risk because markets tend to be efficient. And I think many of these things converge towards something closer to a 1x MNAV rather than closer to a 2x

MNAV in time. I could be wrong on that. So, not financial advice obviously, but I think that's where a lot of people have gotten burned where these things are trading at, you know, you have 500 million of ETH on the books, but you're trading at $2 billion um market cap. Um, and and so the market can be irrational. There's there's share float issues and illiquidity issues. There's all sorts of sort of complexity here. So, I think by and large people should probably be careful and probably should should avoid this and let kind of DAT mania die off a little bit just like there was Spackmania. you know, you there's you're you're dealing with a very high uh risk, high volatility sort of moment. Um, but I think there will come a time where from a like thoughtful investor's perspective, some of these things will be very compelling and that might take

six or 12 months, right? It might take 6 months for the MNAs to collapse back closer to one. Um, it might take 12 months for the good managers of these assets to emerge. And so, you see some dispersion. You start to see like, oh, the these guys really know what they're doing and and those guys don't. And so the guys that don't get consolidated up. And so you kind of have to let that play out a little bit and be patient. And so yeah, my my sort of advice would be most people actually probably should not be doing this. The people that are make sure you actually understand what you're investing in. If you understand it, there are some opportunities there because there are things that are trading below MNAV. There are things that like are mispriced in the market.

There are, you know, micro cap things that are illquid that actually if you buy into once the market figures out, you know, that that it's actually really good management team, those things probably do really well. um you get some sort of you know levered ETH kind of exposure if that's what you're looking for. But these are all like pretty sophisticated financial tools that most people very very wary of. >> I had a feeling you were you were going to say that. I had a feeling you were going to say that which actually perfectly sets me up to say if you want help understanding these things you should subscribe to Milro Pro because at Milro Pro we break down dats and mnavs for you guys on a regular basis. We've been putting out a bunch of reports about it. So check out Milkro Pro. I had

to do the show. I just I had I had to take the opportunity. And then I think Abigail's your point though is very well taken. Dats can be a great investment, but it's difficult. So be very careful. And the time to invest in them might not be now. It might be during the next bare market when you can pick them up at a cheaper rate and when they've had some time to get through this mania that they're in right now and they've settled and we actually have an outlook that makes sense. So be careful out there everybody. And if you are investing in DAT and you want to now check out Milk Road Pro Abby show, great to have you back on the show. Thanks for the time.

>> Great to see you. Thanks for the time. >> As always, remind you guys on today's episode of Financial Advice. Thanks for tuning in everybody. If you're swapping, make sure you check out Milk Road Swap, swap.mmillro.com, best fees in the space, what I use to swap. Have yourselves a wicked awesome day. We'll see you back again tomorrow. Want insights on what's moving crypto markets and how we're trading each event? Subscribe to our channel and join the Milk Growth Daily and Pro Newsletters and start investing like the top 1%. This show is for educational purposes only. Nothing we say is financial advice. Investing is risky. Never invest more than you can afford to lose.